December 3, 2012

Study Shows Personal Satisfaction Increased When Income Is Too

Money may not buy happiness, but a new study shows that increasing personal income can have a positive effect on a person´s satisfaction.

The study, published in the Journal of Personality and Social Psychology, examined a host of economic, societal, and psychological factors in an attempt to correlate happiness and overall life satisfaction with financial well-being.

"We've found that rising income does lead to rising happiness, but it depends on people being optimistic, not having sky-high desires, and the average person being actually able to afford more things,” said study co-author Edward Diener, of the University of Illinois. “So income is helpful, but only in certain circumstances.”

In the study, the researchers culled information from the first Gallup World Poll, which conducted surveys by telephone and in face-to-face interviews. Respondents submitted their household income, rated their level of life satisfaction, and answered questions about the emotions they had experienced on the previous day.

The survey also gauged participants' level of material possessions by asking if they had enough money for food, shelter, a television set, and if their household had an Internet connection. The survey also asked how they felt about their personal future and their satisfaction with their present standard of living.

To measure economic realities on a larger scale, the researchers obtained information regarding each country's gross domestic product per capita from the International Monetary Fund.

After analyzing the data, the researchers found that increases in household income were generally linked with higher levels of life evaluations and more positive feelings. They also found that increased wealth translated to a greater sense of well-being if it enabled people to purchase more material goods, like a television.

According to Diener, the new research draws into sharp contrast with the "Easterlin Paradox” that suggests the economic growth of nations does not lead to happier individuals. Postulated in 1974 by Richard Easterlin, the theory asserts that because people´s standards for incomes rise as their society´s overall economy rises–there is no net gain in life satisfaction.

"According to the 'Easterlin Paradox,' rich individuals are happier than poor ones but rising incomes do not seem to be associated with an increase in happiness," he said. "Our research contradicts this concept by finding that rising income will only have an effect if aspirations or desires do not rise even more quickly.”

“If people make more money, they can be happier,” Diener noted. “But if they are constantly disappointed because they expected to make even more money, then rising income might not help."

In the report, Diener and his colleagues pointed out that a desire for wealth and material goods drives both societal and economic forces.

“Most societies are now working toward material prosperity, and producing higher incomes is the activity that occupies most of the time and energy of individuals and governments,” they wrote.

“Individuals spend more time working than in any other waking activity, and governments highly emphasize economic growth. Thus, the issue of whether economic growth will improve people´s subjective well-being is of both theoretical and applied import,” they concluded.